Healthcare supply chain and value analysis professionals are estimating projected and promised savings on their price, standardization, and value analysis projects. Yet, an estimate or promise of savings in today’s economic downturn isn’t good enough for the following strategic reasons:
1. Make Certain that Savings Budgeted by Finance are Validated: It is our estimate that 57% and growing of all hospital, system, and IDN’s finance departments are now including supply chain and value analysis projected and promised savings into their budgets’ assumptions/predictions. This emerging best practice can become very disconcerting for supply chain or value analysis executives if their savings projections or promises are wrong.
2. Verify Vendor Promises: We have documented that vendor promised savings can be off by as much as 26% to 46% on most commodities and PPIs. With this track record, you’ll want to verify that vendor promised savings really happen as planned.
3. Prove Savings are Real: As healthcare supply chain professionals, we owe it to our healthcare organization that if we project or promise a savings, it happens. No longer can we hope that our projected or promised savings were realized if we want to be taken seriously by our senior management.
4. Verify Contract ROIs: Group purchasing organizations also promise savings and expected ROIs for healthcare organizations in their contracts. Shouldn’t you know for certain how much your GPOs are really saving you?
The bottom line on projected, promised, and even guaranteed savings is that they need to be validated on at least a quarterly basis to ensure that your initial savings projections are being realized. If not, you rob your organization of the ability to make mid-course corrections on your contracts and VA outcomes.
One validation example explains this fact in a simple way. One of our clients was only saving 30% of their projected savings on new floor gloves after one year of a three-year contract only to find out, after a thorough investigation, that his very old floor glove dispensers were very wasteful. Once this problem was corrected with new dispensers, they then realized his projected savings. Not only did they achieve the savings and recover the lost dollars, but their savings in year two and three turned out to be over 120% of the original savings promised on their contract. Can you too guarantee that all of your projected, promised, and guaranteed savings are really happening?
P.S. This article is an excerpt from “The Ultimate “Closed-Loop” Savings Validation Guidebook.” If you would like to have the full text on this must read 41-page guidebook in an electronic form, just e-mail me at [email protected].
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